~ An Aussie look at Financial markets-Been in the Biz for over 30 years!

Tuesday 21st February- Australian Market Wrap

ASX 200 slipped slightly under the weight of disappointing results and the market waited for BHP numbers. At the close, the ASX 200 finished down 4 points at 5791 having rallied to near square from early losses. Resources and consumer discretionary stocks were the only sectors showing gains. Asian continued the rally with Japan up 0.68% and China up 0.25%. AUD in stasis at 76.70c and US Futures up 39.

Energy mixed with coal stocks doing well on the NorthKorean/Chinese production ban. WhitehavenCoal (WHC) +2.79%.

Gold miners retreated as bullion prices fell. The capital raise from BeadellResources (BDR) -8.70% for $51m also tore some of the enthusiasm out of the market. Westgold (WGX) +0.79% once again bucked the trend on a resource update as did StBarbara (SBM) +1.80%. The remainder slid, NorthernStar (NST) -3.79%, Evolution Mining (EVN) -1.26% and SaracenMineral (SAR) -3.91%

Banks and financials drifted in the big four with the basket slipping to $182.65. Private health insurers rose with NIBHoldings (NHF) +1.37% and MedibankPrivate (MPL) +1.44% with insurers barley changed.

Speculative stock of the day: Cape Lambert (CFE) +52.63% after announcing a binding agreement for cobalt mining and tailings operations in the DRC. See QOD today for more on the cobalt story. 50:50 JV to develop cobalt and copper projects near production.

CORPORATE NEWS

Aconex (ACX) -6.17% reported a $3m drop in revenue due to the Brexit vote in the UK. Revenue grew 38% to $77m and will not pay a dividend.

Altium (ALU) -4.98% reported an 8% rise in profits to US$9.86m with revenue up 14% to US$48.7m and a dividend of 11c.

Bradken (BKN) +0.31% after a loss of $3.84m as underlying net profit rose to $16.81m more than doubling.

Caltex (CTX) +1.62% announced a 17% fall in profits to $524m with revenue down 10% to $1.79bn. 52 c final dividend.

Fairfax Media (FXJ) in a trading halt as it is about to unveil plans to split out some of its holding in Domain. Seems the company is planning to retain a 70% holding with more details due with the numbers tomorrow.

Greencross (GXL) +6.79% after a very good result as net profit rose 17% to $21.9m. Expect upgrades to come. EBITDA jumped 14% to $51.4m. The company lifted its interim dividend by 6% to 9.5c.

Independence Group (IGO) -6.18% announced a $20.2m profit with revenue rising $223.1m from $218.8m due to higher metal prices.

Monadelphous (MND) +11.53% another good result in stark contrast to the WorleyParsons (WOR) -% results yesterday. Revenue fell to $627.1m from $739 million the previous year while gross profit dropped to $66.6m from $78.7m. The outlook statement though talked of stabilisation and slight improvement ahead.

Oil Search (OSH) -2.12% reported a full year profit of US$89.8m up from a loss last year of US$39.4m. Unfranked dividend of US$2.5c.

Scentre Group (SCG) -1.11% the company that runs Westfield shopping centres here, has reported a 10.4% rise in after tax profit for the year ended December 31 to $2.99bn, despite a decline in revenue. Revenue for the period fell 12.1% to $2.52bn, funds from operations rose 3.2% to $1.24bn.

The data on activity and inflation in the global economy had been more positive over recent months.

Members observed that inflation in the advanced economies had continued to increase recently, mainly as a result of higher oil prices.

Growth in the United States had increased in the second half of 2016.

Growth in Japan had picked up over 2016 to be above estimates of potential growth.

The 0.5% decline in real GDP in the quarter was considerably weaker than had been expected, reflecting some temporary factors, including disruptions to coal supply and bad weather.

Although export volumes had been unexpectedly weak in the September quarter because of supply disruptions, growth in resource exports had subsequently increased.

There had been very little change to the forecast for inflation.

Underlying inflation was expected to pick up gradually, largely because unit labour costs were expected to rise gradually and spare capacity in the economy was expected to diminish.

The economy was continuing its transition following the end of the mining investment boom. The fall in GDP in the September quarter had reflected some temporary factors.

The unemployment rate was forecast to edge lower, which implied that spare capacity would persist in the labour market for some time.

Medium-term inflation expectations had remained well anchored and inflation was expected to increase gradually.

ASIAN NEWS

Chinese companies are big winners in the race to invest in Abu Dhabi’s biggest oil concessions.. They now hold 12% as the Middle East looks increasingly to Asia for new investment dollars.

Abu Dhabi, with 6% of global crude reserves, is seeking to boost production capacity to 3.5m barrels a day by 2018.

EUROPE AND US

Net long positioning in crude oil rose to new record highs at 557.6k contracts, up 29.7k in the week to February 14, according to CFTC data. Funds now hold a net long position equivalent to a record 903m barrels of oil.

As divorces go, this is expensive. The European Commission wants the UK to pay into EU projects for four years, after it has signed a Brexit deal, with final payments continuing up until the end of 2023. This is part of a demand to settle a €60bn bill.

Expect to hear more on Greece as creditors are heading to Athens to thrash out more structural reforms. Greece needs around €7bn in fresh rescue funds before July in order to cover substantial debt repayments to the European Central Bank and private creditors. Seems strange that the country where hardly anyone pays tax has failed to attract overseas investment.

HSBC has announced a US$1bn share buyback after a 62% fall in profits to US$7.1bn.

And finally…………..

After a game of golf, a lady golfer offered her caddy a ride into town. The caddy thankfully accepted and carried her clubs inside. The lady invited him to stay for lunch and served him a wonderful meal.

She then invited him into the bedroom. He was puzzled but went along out of curiosity. She asked if he wanted to go to bed with her, so he did that too. Later he realised it was time to get back to the course and prepared to leave. The housewife insisted on giving him a dollar before he could go.

This was too much for the poor man, and he asked her ʺLady, what is going on? First, you feed me a delicious meal, and as if that isnʹt enough, you invite me to make love to you, and we have a terrific time together. Now you want to pay me? What is this anyway?ʺ

So she explained proudly, ʺI told my husband I wanted to do something nice for my caddy who has been so faithful and helped me so much this year, so my husband said, ‘Screw the caddy! Give him a dollar!’”